SHKP may face HK$200 million in vacancy tax charges for Victoria Harbour flats

Sun Hung Kai Properties could face HK$200 million (US$25.48 million) in charges on empty flats at its recently completed luxury residential development in North Point, after it was revealed the company is seeking a record monthly rent of HK$100 per square foot in Hong Kong East.

The developer is holding 265 flats at the 355-flat Victoria Harbour development. An occupation permit for the site was received last week.

Belinda Kuan, general manager Signature Homes, the luxury residential leasing arm of SHKP, said on Thursday that 140 units at Tower Six would be released for lease by the end of this year.

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The flats, with size ranging from 361 to 1,063 square feet, would rent for HK$36,000 to HK$140,000 per month.

“The higher rents could mean higher tax to be charged on the remaining empty flats in the development,” said Vincent Cheung Kiu-cho, deputy managing director for Asia valuation and advisory services at Colliers International.

For instance, a 361 sq ft flat will cost SHKP nearly HK$864,000 in charges if it remains vacant for more than six months after completion, while a HK$3.36 million levy could be assessed on the 1,063 sq ft flat, he said.

After deducting 20 per cent for general maintenance cost, he said the tax would ease to HK$700,000 for the smaller sized flat and HK$2.7 million for the bigger flat

Based on the indicative monthly rents of HK$100 per sq ft, Cheung estimated the 265 flats could cost the developer at least HK$200 million if they remain unoccupied for an extended period.

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The vacancy tax was announced in June by Chief Executive Carrie Lam Cheng Yuet-ngor in a bid to unlock extra housing supply.

The tax applies to all newly-completed flats that had been left vacant for six months in a year. Flats are considered completed one year after the developer obtains an occupation permit.

The proposed tax would be equivalent to two years of rental income, calculated by government specialists and based on market rates.

The proposed tax needs Legislative Council approval before implementation.

SHKP, Hong Kong’s biggest developer, is hoarding about 1,000 completed, unsold flats.

“At HK$100 per sq ft per month, this would set them clearly as the most expensive serviced apartments in Hong Kong East, in terms of unit rent,” Denis Ma, head of research at JLL, said, referring to Victoria Harbour.

Victor Lui Ting, deputy managing director at SHKP said 90 flats at Victoria Harbour had been sold.

“The decision to offer Tower Six for rent has no relation with the vacancy tax,” he said, adding that the remaining flats would be offered for sale.

“We do not have plans to offer other projects for lease at the moment,” he said.

In response to the introduction of vacancy tax, some developers are leasing their projects to associates to remove them from the vacancy list.

Last week, Nan Fung Development leased two completed duplex flats and two villas at Deep Water Bay to four companies controlled by its senior management.

The senior management team included Nan Fung’s honorary chairwoman Vivien Chen Wai-wai and her daughter Karen Cheung Tih-loh, as well as one of their associates Ho Hoi-ki, according to Land Registry data.